The National Association of Manufacturers has expanded its efforts in an area that might surprise some folks with a narrow view of the industry trade group. It’s going after proxy advisory firms and activist shareholders that organization members believe have compiled too much power to affect the fortunes of manufacturing companies and the corporate retirement plans on which millions of former factory workers depend.
NAM weighed in about its concerns at a recent Securities & Exchange Commission roundtable in Washington, D.C., on the proxy process, an event organized by SEC Chairman Jay Clayton. NAM President Jay Timmons joined others in criticizing a current process that, he said, damages shareholder value and distracts corporate management unnecessarily, putting the growth of manufacturing companies – and the financial security of their employees and retirees – at risk.
“Our core mission is advancing the ability of manufacturing to compete and succeed domestically and in the global economy,” Timmons tells Chief Executive. “And so we’re looking at the issue of activist investors and proxy advisory firms for how they’re impeding manufacturers from doing just that. They pull the energy and focus of manufacturers from their core business of manufacturing to respond to Wall Street concerns that are often driven by inaccurate information.”
NAM advocates enforcing more accountability for proxy advisory firms, transparency, responsiveness and competition amid tighter SEC regulation.
Proxy advisory firms such as Institutional Shareholders Services advise pension funds and other institutional investors how to vote on shareholder proposals and also provide consulting services to those companies. They also tend to urge shareholders to agitate with companies on environmental, social and governance (ESG) issues that often can be politically motivated.
Both are problems, Timmons and the NAM contend. “Proxy advisory firms that are making recommendations many times have proven to be inaccurate, and in significant cases [the dual roles of proxy advisory firms] could be seen as conflicts of interest,” he says.
And in any event, Timmons maintains, proxy advisory firms often work with politically aligned, activist shareholders “who are motivated not by the success of the company but by a [preferred] philosophic or political outcome.” They structurally advance an agenda that would force companies to look beyond the business of manufacturing, NAM says.
Specifically, for example, NAM would like to see a higher threshold than the current $2,000 worth of shares for a holder to be able to file a ballot proposal for a corporate annual meeting because it allows too many nuisance proposals.